From afar, liberals continue to look upon Donald Trump as quite the buffoon. Someone called him the world’s Twitter-in-chief, who uses the short-format platform to run the US government, fire aides, and insult people he doesn’t like. With the exposures on how he goaded Ukraine to investigate and go after potential competitor and Democrat presidential hopeful, Joe Biden, and followed by the House of Representatives’ impeachment of the US President, one would think Trump’s goose was cooked good and proper.
Not really; and now the swing seems to be the other way. The latest CNN/SSRS poll of US voters shows former vice president Biden is just ahead of Trump 49 per cent to 44 per cent, and since October 2019, the Democrat’s lead has been cut by at least five points. Through his presidency, Trump’s approval ratings have never been great – plateauing around the high 30s and low 40s, and consistently trailing Biden, his most-likely Democrat opponent. However, as the year draws to an end, election year 2020 will open with Trump’s bid for a second term steadily gaining ground.
Among the main reasons for Trump narrowing the gap is the better-than-expected performance of the US economy. The distant view sees the US battered by trade wars with China, Canada and Iran, and then facing the high cost of labour because of Trump’s anti-immigration policy. The truth is the reverse: US consumer consumption is on the upswing and unemployment levels are at a historic low. Reflecting the picture, the latest CNN poll showed 76 per cent of the voters, up from 67 per cent last year, saying the economy is in good shape, the highest approval rating since 2001.
POSITIVE INDICES
Some of the recent data suggests why Americans are upbeat about the economy, despite constant warnings by the Democrats that a recession is around the corner. Consumption, a good barometer of the economy, showed that on ‘Super Saturday’ – also called Panic Saturday’ – the Saturday before Christmas – logged the highest level of sales in US history with US consumers spending $34.4 billion on December 21, breaking last year’s Super Saturday’s record of $31.9 billion. Unemployment, a major drag, has been at 3.5 per cent, a historic 50-year low, and the number of Americans filing for unemployment fell for a second straight week before the Christmas vacation.
The interesting thing is it is not a flash in the pan. Strangely, while corporate investment in the US hit a wall and morale was at its worst among senior executives, unemployment figures for the year hovered about 4 per cent at an average. Those who had left the workforce, continue to rejoin as the hourly wages grew 3.7 per cent, while inflation remained low-to-feeble. All this contributed to putting more money in the working man’s pocket, boosting consumption and economic growth.
Among the primary economic pledges that Trump rode to power in 2016 were trade protectionism and the building of Fortress America, stopping illegal immigration, rolling back individual and corporate tax rates and the repeal of the Protection and Affordable Care Act, also known as ‘Obamacare’.
GOVERNMENT SPENDING
To be fair, Trump has dutifully implemented most of his campaign promises, much of which liberal economists considered regressive. These included raising trade barriers and hiking tariffs on imports, as well as beginning the construction of a physical wall on the border with Mexico to shut out immigrants. However, the classical conservative formula for boosting growth – lowering corporate tax and cutting on regulations, which are aimed at stoking more investment and creating new manufacturing units – did not work.
In fact, private investment actually declined since June. What changed the pace of the economy was the heavy government spending – measures closer to Keynesian economics rather than the conservative ‘government-hands-off’ policies Trump represented. In February 2018, a bill passed with Democrats support in the House and the Senate, lifted budgetary controls and added $143 billion in government spending in 2018 and $153 billion for 2019. Naysayers predicted that with jobs and growth there would be heavy inflation; but that did not happen.
In August, the Republicans and Democrats again ganged up and passed additional spending - $168 billion for 2020 and $153 billion for 2021 to keep the American economy on the growth path. All is not hunky-dory. There are indicators that there have been declines in bond yields, durable goods orders have not been rising, and manufacturing capacity utilization is pointing to a slowdown in economic momentum. Yet most analysts think there is enough fuel in the tank to drive a 2 per cent growth economy. Donald Trump has a long way to go to being elected President again, and impeachment and other issues may drag him down. But the economy is unlikely to be one of the tripping ropes.